Friday, April 30, 2010

Netflix Embracing Both DVD and VOD

Video is in a transition, much the same as the one music experienced a few years ago. We’re moving from a world in which the content is provided on a standardized physical medium to one where the content exists as packets, somewhere out there. Right now we have one foot in each world. If you are a video service provider, you can choose one world over the other, or you can do as Netflix as done and support both.

The iPod and iTunes experience demonstrates that when technology is ready to change, it can happen in a hurry. When was the last time you browsed in a music store? It wasn’t that long ago that every town and every mall had at least a couple music stores full of CDs and a smattering of LPs. Now they’re as hard to find as a vinyl 45 record. The MP3 player, and especially the iPod, put music in the electronic realm with no need to move a physical medium from place to place. The Internet works just fine when your content is in digital form.

Few of us have film cameras and projectors anymore, but we’ve got DVD and Blu-ray players galore. Still sitting on many shelves is the VHS tape player, probably powered off. If VHS tape represents the vinyl record, DVD and Blu-ray represent the CD. They are just different ways to physically transport video content. But what happens when you have the infrastructure to move the content electronically? Do you really need that physical medium anymore?

Broadband Internet enabled music downloads. It’s fast enough now to enable both streaming and video downloads. When fiber optic bandwidth becomes the norm, we’ll really have the information superhighway and there will be little need for “sneaker net” to transport software, data files, music or video. With DOCSIS 3.0 and higher speed DSL developments, we may already have all the bandwidth we really need for video on demand.

You’re starting to see the beginning of it. Video stores are disappearing the way music stores did. Our local grocery store has converted their video department to sell posters and picture frames. Blu-ray is giving the disc medium another lease on life, but it will probably be short lived. The latest wrinkle in retailing is the Blu-ray rental vending machine. It’s a clever idea, but you still have to physically travel to rent and return discs. I give it a few years before even this seems too inconvenient.

Netflix is the video rental service that saw this transition coming and is taking advantage of it. The first thing they did was differentiate themselves by renting DVDs by mail rather than building a portfolio of physical stores. With 100 shipping locations, they can get a DVD into your mailbox within a business day most of the time. The service is sold as a reasonably priced monthly subscription to eliminate mad dashes to the store in time to avoid late fees. When you want another movie, you drop the one you have in the mail. The mailers are provided and postage paid to eliminate the usual annoyances of using the mail.

This is a slick system that supports DVD, Blu-ray and any other physical medium the video industry comes up with. But the lure of fast and easy online viewing is tilting the pendulum toward digital delivery. Netflix has responded by adding Internet streaming to its service at no extra charge. The amount of content is limited right now, but there’s enough to make it interesting and give you plenty to watch on the spur of the moment. Between Netflix plans that start at $8.99 a month and free over the air TV, a good number of people have found it a lot cheaper to eliminate their cable or satellite service and still get as much viewing variety as they need.

Does Internet viewing mean you need to sit in front of your computer to watch a movie. You certainly can if you want to, but you also have the option to view Netflix rentals on your television. Some TVs offer the ability to be used as VGA monitors, making connection to the big screen easy. Some of the latest flat screen TVs have Internet access built-in, so you can watch Netflix and even YouTube videos. Some LG HDTVs are Netflix-compatible, as are some Blu-ray players. Netflix has even gone beyond this to enable gaming consoles, such as the Wii, PS3 and Xbox 360 to access your video account. These devices are already connected to a television, so they are logical “set top devices” for Internet based video.

Follow Telexplainer on Twitter